Lower federal taxes help Territorial double earnings

Territorial Savings Bank’s net income more than doubled in the fourth quarter as loans increased 5.8 percent from the year-earlier period and tax expenses fell sharply due to a new federal law that went into effect at the start of 2018.

The holding company of the state’s fifth-largest bank, Territorial Bancorp Inc., said Tuesday its net income rose to $4.6 million, or 50 cents a share, to beat analysts’ estimates by 2 cents. A year earlier Territorial earned $2.2 million, or 23 cents a share.

For the year, Territorial’s net income jumped 28.4 percent to $19.2 million, or $2.03 a share, from $15 million, or $1.57 a share, primarily due to a $5 million decrease in income tax expenses.

“In 2018, the company performed well despite the challenges from rising interest rates and home prices in Hawaii,” Territorial Chairman and CEO Allan Kita- gawa said. “Our strong performance has allowed us to grow our loan portfolio and interest income.”

Territorial’s income tax expense for the fourth quarter was $1.74 million, 47 percent lower than $3.29 million in the year-earlier quarter. For all of 2018 Territorial’s income tax expense fell by $5 million to $6.1 million from $11.1 million in 2017. The Tax Cuts and Jobs Act that went into effect Jan. 1 reduced the corporate tax rate to 21 percent from 35 percent.

Territorial, which generates more than 95 percent of its loans from residential lending, said its overall loans receivable increased to $1.57 billion from $1.49 billion in the fourth quarter of 2017. Deposits rose 2 percent to $1.63 billion. Assets grew 3.3 percent to $2.07 billion.

The bank’s interest income rose 8.3 percent to $15.5 million last quarter and 9.3 percent for the year to $60.3 million due to increased interest earned on loans, but its net interest income fell due to a decline in interest income from investment securities.

The bank’s net interest income — the difference between how much Territorial pays for deposits compared with what it charges to lend out money — slipped 0.2 percent in the fourth quarter to $14.9 million.

Its noninterest income fell 2 percent to $839,000 primarily due to a $34,000 decrease in the gain on loan sales.

Territorial’s stock slipped 8 cents to $26.89 Tuesday in what was an overall down day for the stock market. The financial results were released after the market closed.

The bank also maintained its quarterly dividend at 22 cents a share. It will be payable Feb. 19 to shareholders of record as of Feb. 5.

FOURTH-QUARTER NET

$4.6 million

YEAR-EARLIER NET

$2.2 million